Consumer Law & Policy Blog

More on the Guidance on Subprime Mortgage Lending

by Jeff Sovern

Over the weekend, Brian Wolfman blogged about the proposed Interagency Guidance on Subprime Mortgage Lending.  The draft Guidance, which is proposed by the Fed, OCC, OTS, FDIC, and the National Credit Union Administration, can be found here.  The Guidance implies that the Agencies have concluded that the Truth in Lending Act (TILA) is not functioning satisfactorily in at least two respects with repect to certain subprime loans (particularly certain adjustable-rate mortgages): the content of TILA's disclosures and its requirement that  disclosures be provided no later than consummation.  Thus, the Guidance states with repect to these loans that "communications with consumers, including advertisements, oral statements, and promotional materials should provide clear and balanced information about the relative benefits and risks of the products. This information should be provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at consummation of the loan." 

Maxed Out: "A Horror Movie for Our Times"

By Brian Wolfman

In today's Washington Post, Michele Singletary reviews the new, critically acclaimed movie "Maxed Out" and its companion book "Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders."  Deepak Gupta previously discussed the movie in detail on this blog.  The movie opens in Washington, D.C., and in other markets around the country this coming Friday.  A list of openings can be found here.  As the Post puts it, this movie is "A Horror Movie for Our Times."

More Stringent Federal Guidelines on Sub-Prime Mortgage Lending?

Just a follow-up to Chris Peterson's Boston Globe op-ed concerning predatory mortage lending posted earlier today on this blog:  According to today's Washington Post, the Federal Reserve and four other federal agencies (presumably agencies involved in some fashion in mortgage lending) are proposing a new guidance that would impose stricter guidelines on sub-prime mortgage lending.

Cleaning Up a Consumer Lending Mess

By Christopher Peterson

WHEN THE CEO of HSBC, one of the world's largest banks, and legal aid attorneys who represent poverty-stricken Americans find something to agree on, it is no small event. Recently, CEO Michael Geoghegan explained that massive losses in HSBC's home mortgage lending business were caused by the mistake of "going for volume." The nation's legal aid attorneys have a different description. They call it predatory lending.

Continue reading Boston Globe Op-ed   ...

Consumer Protection, Bush Style

By Brian Wolfman

    President Bush has nominated Michael Baroody to chair the Consumer Product Safety Commission.  Baroody is a longtime executive with the National Association of Manufacturers.  Hmmm.

  Here's what tomorrow's edition of Congress Daily has to say about it:

    The White House announced Thursday that President Bush intends to nominate Michael Baroody, a longtime executive at the National Association of Manufacturers, as chairman of the Consumer Product Safety Commission. Baroody, who serves as the association's executive vice president, has worked for the group since 1990 except for a period in 1993-94 when he ran a Republican-affiliated group.

     He has been heavily involved in NAM's lobbying, policy and political operations. NAM President John Engler praised Baroody for his skills as a consensus builder, and for his efforts to promote policies that make manufacturers competitive.

     "Mike Baroody has spent a lifetime in Washington serving in a variety of professional venues and has distinguished himself at every turn for his good sense, good judgment and good humor," Engler said.

     Baroody previously worked as a White House aide when Ronald Reagan was president and then as an assistant Labor secretary. His nomination goes to the Senate Commerce Committee and requires confirmation by the Democratic-controlled Senate.

    So, will Baroody get through the Senate?  (Note:  A little while back, there were rumors that the Administration would put Baroody in through a recess appointment.  Either the rumors were false or the Admnistration changed its mind.)

Fourth Circuit on Fees for TILA Litigation

by Allison Zieve

Last week, the Fourth Circuit issued a decision upholding an award of attorney fees in a Truth in Lending Act (TILA) case, Nigh v. Koons Buick. Two aspects of the decision are noteworthy.

First, although Mr. Nigh won the case, the amount of damages that he had originally been awarded ($24,192) was reduced by the Supreme Court in 2004. The Court held that TILA capped damages at $1,000.  On remand, the district court had affirmed its prior attorney fee award and also awarded Mr. Nigh attorney fees for work done on the successful appeal and the unsuccessful trip to the Supreme Court.  In its February 21 decision, the Fourth Circuit upheld the fee award in its entirety. The appellate court explained that TILA requires a fee award to an person who brings a "successful action" and that Mr. Nigh’s action was successful (he proved a TILA violation). Although the fee covered work for parts of the case as to which Mr. Nigh was unsuccessful, the appellate court held that the district court did not abuse its discretion and that the amount of the award was reasonable.

Second, the court strongly rejected Koons Buick’s argument that Mr. Nigh’s degree of success—as measured by $1,000 in statutory damages—did not merit a full fee award. The court wrote that Mr. Nigh had received not minimal damages, but the statutory maximum. "Koons contention that this recovery is somehow de minimis betrays a profound misunderstanding of either the expression or the facts of the case."  Nicely put.

[Disclosure: I was co-counsel for Mr. Nigh in the Supreme Court proceedings but have not been involved in the fee proceedings on remand.]

The 12 Most Popular Tax Scams

By Brian Wolfman

    In today's Washington Post, Michele Singletary discusses her "Dirty Dozen": the 12 most popular scams that tax preparers try to sell to taxpayers hoping for a big (but illegal) federal tax refund.  At the end of the day, either the rest of us are the victims (if the IRS does not catch the cheaters) or the taxpayer gets socked with a big liability, including the unpaid taxes, interest, civil monetary penalties, and even criminal sanctions.  The top scam this year, Singletary explains, relates to a new law entitling millions of taxpayers to a credit for an improperly collected 3% federal telecommunications excise tax.  The credit is a flat $30 to $60, unless the taxpayer has records showing that he or she actually paid more in excise tax.  The scam artists are urging taxpayers to inflate the credit, and, Singletary claims, some taxpayers, at the insistence of tax preparers, have sought credits in the total amount of their phone bills rather than just the 3% excise tax.